Monetary Persistence and the Labor Market: A New Perspective

Dennis Snower, Christian Merkl and Wolfgang Lechthaler

No 7650, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this paper we propose a novel way to model the labor market in the context of a New-Keynesian general equilibrium model, incorporating labor market frictions in the form of hiring and firing costs. We show that such a model is able to replicate many important stylized facts of the business cycle. The reactions to monetary and real shocks become much more sluggish. Job creation and job destruction are negatively correlated. And the volatility of unemployment is much larger than in the standard search and matching model.

Keywords: Business cycle statistics; Hiring and firing costs; Labor market; Monetary persistence (search for similar items in EconPapers)
JEL-codes: E24 E32 E52 J23 (search for similar items in EconPapers)
Date: 2010-01
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Citations: View citations in EconPapers (70)

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Related works:
Journal Article: Monetary persistence and the labor market: A new perspective (2010)
Working Paper: Monetary Persistence and the Labor Market: A New Perspective (2010)
Working Paper: Monetary Persistence and the Labor Market: A New Perspective (2008)
Working Paper: Monetary persistence and the labor market: A new perspective (2008)
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